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04/21/23 1
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Describe the factors that influence consumer behavior online
Understand the decision-making process of consumer purchasing online
Describe how companies are building one-to-one relationships with customers
Discuss the issues of e-loyalty and e-trust in EC
Describe consumer market research in EC Describe Internet marketing in B2B,
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Describe the objectives of web advertising and its characteristics
Describe the major advertising methods used on the Web
Describe various online advertising strategies and types of promotions
Describe permission marketing, ad management, localization, and other advertising-related issues
Understand the role of intelligent agents in consumer issues and advertising applications advertising applications
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The Problem Small business designing and manufacturing
mountain bike components 1995 Web site was a status symbol rather
than a business tool The site did not:
Offer enough customer information Enable the company to gain insight into
their customers’ needs and wants
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The SolutionCustomer surveys introduced the site
Web Trader automatically saves and organizes answers in the database—this information is used to make marketing decisions
Created an electronic product catalog Visitors can browse through the product catalog with detailed descriptions and graphics of products
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The ResultsConsumers can purchase bikes, parts,
accessories, bags, water bottles and Dealers can:
Place orders on the site Learn about new products quickly Site used for market research, communicating with customers and advertising
What we learnChange from a passive Web site (just having a presence online) to one with interactivity can bring tremendous benefits to a company in terms of finding out customer wants and needs and how to market products effectively to them
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Business today very competitiveCompanies treat customers as royaltyFinding and retaining customers key Need to understand consumer
behavior Done through various models A consumer model—an understanding of how a consumer makes a purchase decision
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EC consumers composed ofIndividual consumersOrganizational consumers
Most bulk purchase happens in this groupGovernmentsPrivate corporationsResellers
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Two types of variablesPersonal characteristics (demographic)
Environmental variables Social Cultural/community Other (legal, political, technological, government regulations, etc)
Consumer behavior viewed in terms of:Why is the consumer shopping?How does the consumer benefit from
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Social variables—people influenced by:
Family members, friends, co-workers, “what’s in fashion this year”; chat rooms
Cultural/community variables—where the consumer lives
Other environmental variables: Available information, government regulations, legal constraints, etc
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Age and gender Marital status Educational level Ethnicity
Occupation Household income Personality Lifestyle characteristics
This is a simplified version of what consumers do but the process of purchasing a product can be more complex especially if the product is new
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Roles people play in decision-makingInitiator—suggests/thinks of buying a
particular product or serviceInfluencer—advice/views carry weight
in making a final buying decisionDecider—makes a buying decision Buyer—makes the actual purchaseUser—consumes, uses a product or
service
One or more individuals may play these roles; advertisers and marketers need to target them
Knowing the decision making process, marketers can Predict Improve Influence consumer decision to buy
Two models are discussed here Generic and CDSS (consumer decision support system)
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6 major phases of a general model1. Need identification2. Information search3. Evaluation of alternatives 4. Purchase and deliver5. After-purchase evaluation6. Repeat purchase
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DECISION PROCESS
Need recognition
Information search
Evaluation, selection
Purchase, payment, delivery
After purchase
CDSS SUPPORT
Agents and event notices
Virtual catalogues
FAQs/summaries, samples and trials; testimonies
Ordering of product, arranging delivery
Customer support (email, newsgroup)
INTERNET & WEB SUPPORT
Banner ads, newsgroups
Web directories, internal search and external search engines, information brokers
Discussion in newsgroups, cross site comparisons
Electronic cash and virtual banking
Logistics providers and package tracking
Discussions in newsgroups
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A more effective model is described as one-on-one marketing, Each customer treated in a unique way Marketing and advertising fit customer
profile and needs Achieved through personalization and
customization Relationships seen as a two-way street:
Customer information is collected and placed in a database
Customer’s profile is developed Generate “four P’s” of marketing:
Product Place Price Promotion
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One-on-one marketing possible throughPersonalization—the matching of services, products, and
advertising content to individual consumer
User profile—the requirements, preferences, behaviors, and demographic traits of a particular customer.
Cookie/web bug—a data file that is placed on a user’s hard drive by a Web server, frequently without the user’s consent, that collects info on the user’s activities at a site
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Major strategies used to compile user profiles include:Solicit information directly from the
user.Observe what people are doing onlinePerform marketing researchBuild from previous purchase patternsMake inferences (from information
provided by customers on other issues)
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Customer loyalty—degree to which the customer stays with vendor or brand Major objective of one-to-one B2C and B2B
marketing A significant contributor to profitability
More costly to acquire a customer than keep one Strengthens a company’s market position since
loyal customers are shielded from competition Two broad types of customers:
Loyalists who Are emotionally attached to the company Rationally chose the company as the best Find it bothersome to shift
Migratory customers Change lifestyle Angered by poor service Find more option through EC
E-loyalty—customer’s loyalty to an e-tailerLearn about customers’ needs
Interact with customersProvide customer service
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Factors that affect satisfaction Information quality
Accuracy Richness of content Format of content (multimedia) Timeliness—updated constantly
System quality Ease of navigation Ease of use Response time Security settings and privacy assurance04/21/23 24
Factors that affect satisfaction Service quality
Responsiveness Assurance/warranty Empathy –understanding, sympathy,
compassion, kindness etc Other solutions
Fast and time-saving service 24/7 operations Better prices Free promotions, gift ideas and sales Cut down shipping costs and delivery times Ask for less information about customers
and provide more information on the product
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Key in creating loyalty and retention of customers
Ability to create satisfaction is a competitive advantage and differentiating factor
80% of satisfied online customers shop again and recommend the site
About 90% dissatisfied ones never come back
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Trust—psychological status of involved parties who are willing to pursue further interactions to achieve a planned goal EC vendors must establish high levels of
trust with current and potential customers Will the parties keep their promise to deliver Pictures not the same as the actual product Particularly important in global EC since:
Legal action is hard to undertake Differences in culture, business
environments Security concerns deter revelation of credit
card
Level of trust determined by:Degree of initial success experienced with EC
Well-defined roles and procedures for all parties involved
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Trust can be decreased by:Any user uncertainty regarding the technology
Lack of initial face-to-face interactionsLack of enthusiasm among the parties
Solutions:Brand recognition and co-branding
Improve security mechanisms throughTrust certification and seals, Third party evaluation of vendors
Trust certificates and seals Evaluate vendors using 3rd parties Let users and buyers evaluate products Have a return policy, warranties &
insurance Free samples Have privacy statements and
guarantees Co-branding with big companies and
vendors Good Web design
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The goal isFind information and knowledge that
describes relationships among consumers and products
Establish marketing plan and better understand the purchasing process
Evaluate market performanceOn the Web, the goal is to turn a
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EconomyIndustry Firms ProductsPricing
DistributionCompetitionPromotionConsumer
purchasing behavior
Market research includes gathering information about:
Can be both online and offline Common tools include:
QuestionnairesSurveys (through emails and telephone)
Focus groupsObservationInterviews
Important first to understand how groups of consumers are classified
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Market segmentation—process of dividing a consumer market into logical groups for conducting marketing research, advertising, and sales
Main ways of segmenting the marketGeographic
Region Size of city, county or district
Population density Climate Language
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Demographic Age Occupation Gender Education Family size Religion Race, Income Nationality
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Cognitive, affectiveAttitude, benefits sought, loyalty, usage rate, perceived risk, internet shopping experience, etc
Psychographic Social class Lifestyle Personality
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Conventional methods of research earlier mentioned are expensiveInternet Research is
Faster and more interactiveCan cover a large geographical area
Cheaper and yet sophisticated since its reach and richness is extensive
Larger sample which improves the reliability of results
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Online market research aims to: Find, explain & predict online buying
behavior Find out why some customers buy online and
others do not Establish purchase patterns for individuals
and groups Find the factors that encourage online
buying Identify real buyers from mere browsers Understand how individuals navigate Web Get optimal Web design that engages clients
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Knowing these answers helps a vendor to properlyPriceAdvertiseDesign the Web site and Provide appropriate customer service
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The main ones are:One-on-one by e-mailFocus groups in chat-roomsQuestionnaires placed on Web sites for
tracking customers’ movements on the Web through Transaction logs (record of user activities on a company’s web site)
Click-stream behavior (or movt on Internet)
Cookies Web bugs Spy-ware Web analytics (data and web mining) Voting polls Web-based surveys Hearing directly from customers
creating customer scenarios
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Tracking customer movements—learn about customers by observing their behavior rather than by asking them questionsTransactionClickstream behaviorCookiesWeb bugs
How to get respondentsIncentives such asGamesPrizesFree softwareDiscounts
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Accuracy of responses Loss of respondents because of
equipment problems Ethics and legality of Web tracking Focus group responses can lose
something in the translation from an in-person group to an online groupEye contact and body language are lostAnonymity is necessary to elicit an
unguarded response
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Lack of representativeness in samplesOnline shoppers tend to be wealthy, employed, and well educated; results may not be extendable to other markets
Lengthy analysis arising from huge volumes of data
Solutions to some of the problems:Automate process of data analysisOutsource the research to third parties
The right kind of sampling is achieved through verification of target audience or demographic Anonymity causes a loss of information
about demographics and characteristics of the respondents
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Data mining—the process of searching a large database to discover previously unknown patterns; automates the process of finding predictive information
New business opportunities generated by conducting:
Automated prediction of trends and behaviors
Automated discovery of previously unknown patterns and relationships
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Web mining—application of data mining techniques to discover meaningful patterns, profiles, and trends from both the content and usage of Web sitesWeb content miningWeb usage mining
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Advertising is an attempt to disseminate information in order to affect a buyer-seller transaction
Interactive marketing—marketing that allows a consumer to interact with an online seller2-way communication & e-mail capabilities
Vendors also can target specific groups and individuals
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Ad views—number of times users call up a page that has a banner on it during a specific time period; known as impressions or page views.
Button—a small banner that is linked to a Web site
Page—HTML document Click—a count made each time a
visitor clicks on an advertising banner to access the advertiser ‘s Web site
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CPM (cost per thousand impressions)—fee an advertiser pays for each 1,000 times a page with a banner ad is viewed
Hit—request for data from a Web page Visit—a series of requests during one
navigation of a Web site; a pause of request for a certain length of time ends a visit
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3/4 of PC users gave up some television time
Well educated, high-income Internet users a desired target for advertisers
Internet is by far the fastest growing communication medium
Advertisers want a medium with such potential reach, locally & globally
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CostCheaper, updated any time with little cost
Richness of formatUse of text, audio, graphics, and animationGames, entertainment & promotions
combined Personalization
Can be interactiveTargets specific interest groups/individuals
Banner—on a Web page, a graphic advertising display linked to the advertiser’s Web page
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Banner swapping—an agreement between two companies to each display the other’s banner ad on its Web siteDirect link between sitesAd space bartering
Banner exchanges—markets in which companies can trade or exchange placement of banner ads on each other’s Web sites (bcentral.com)
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Pop-under ad—an ad that appears underneath the current browser window, so when the user closes the active window, they see the ad
Interstitials– an initial Web page or a portion of it that is used to capture the user’s attention for a short time while other content is loading
E-mailSeveral million users may be reached
directlyProblems: junk mail, spamming
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URL (Universal Resource Locators)Advantages:Minimal cost is associated with it
Submit your URL to a search engine and be listed
Keyword search is used
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Advertising in chat roomsVirtual meeting groundFree addition to a business siteAllows advertisers to cycle through
messages and target the chatter againMore effective than bannersUsed for one-to-one connections
Advertorial—an advertisement “disguised” to look like an editorial or general info